Governance Best Practice

Since its establishment Hera has been following a path of excellence, in a continuous and transparent dialogue with the financial market, which aims to create value for the stakeholders.

The Group undertook actions in order to improve its corporate governance, both specific and as part of Board meetings, in line with the international best practice. Since 2014, the Group has intensified this activity in order to ensure that directors acquire adequate knowledge of the main issues related to the company as quickly as possible.

Strategic induction to Board of Directors

Every three years, following the regular renewal of Hera SpAís Board of Directors, the Executive Chairman and the CEO organise a period of induction designed for the newly appointed Directors and Auditors, as foreseen by Borsa Italianaís Code of Conduct.

The activities are generally carried out during 3 sessions, organised between May and June, within which the companyís top management provides in-depth materials concerning the sector in which the company operates, its internal dynamics and development over time, as well as the principles of correct risk management, the applicable regulatory framework and elements of self-regulation.

The procedure is aimed at allowing new Directors and Auditors to grasp the complexity of the Groupís activities, so that they are able to immediately fulfil their institutional role in an optimal way.

The meetings, which are backed up by a well-structured and detailed documentation, are highly appreciated and have become a stable component of the mix of tools involved in managing the Groupís Governance.

Induction activity in 2019

In line with past practices, the Board of Directors has taken steps to prepare specific and in-depth discussions at Board meetings, intensifying this action in order to ensure that the directors acquire adequate knowledge of the main issues concerning the Company as quickly as possible.

Starting from previous years, specific induction sessions were carried out to provide directors with adequate knowledge of the main sectors of activity (networks, energy and environment) and several in-depth sessions were prepared, within the meetings of the Board of Administration, focusing on business issues, investments, organization, the market scenario, the evolution of regulations, upcoming tenders, and risk management.

The induction plan and updating sessions related to risk issues (in particular environmental ones) and investments continued in 2019 as well.

Specifically, visits to the Group's plants and production sites were organized; furthermore, in-depth analyses were carried out on risk assessment, crisis management, legislation relating to environmental services, financial risk reports and investments. New protocols have also been adopted with reference to the Organization Model pursuant to Legislative Decree 231/2001 and the periodic Reports of the Internal Controls and Risks Committee were presented.

In 2019 as well, further investigations were carried out as part of strategy day, as a moment of collaborative reflection on the future, with the support of management. These included a session dedicated to the strategic initiatives of competitors and their potential impact on the sector and on the Hera Group.

†

UN Global Compact, Art. 10Anti-corruption.

Businesses should work against corruption in all its forms, including extortion and bribery.Hera answers the call to action

Companies face high ethical and business risks and potential costs when they fail to effectively combat corruption in all its forms. In order to answer the UN Agendaís call to action, the Group carries out anti-corruption measures as part of its mechanisms to express corporate sustainability and to protect its reputation and the interests of their stakeholders, creating shared value.

Hera's anti-corruption system is composed of:

Ethical code;

Quality and Sustainability Policy;

model for corruption prevention which integrates the existing "Model 231";

whistleblowing system for the management of reports relating to offenses of a corruptive nature and potential relevance 231.

ISO 37001 certification for the prevention of corruption

Following the introduction of legislative decree 231/2001 into Italian regulations for legal entities' responsibilities for certain offences committed in the interest or to the advantage of said entities by people charged with representing, administrating or managing the entity in question, as of February 2004 Hera has adopted the organisation and management model described in legislative decree 231/01 (the "Model 231").

The same date also saw the approval of the Ethical Code (now at its 4th revision), which contains the Groupís principles of "corporate deontology", and the nomination of the Supervisory Body (SB) as the subject provided, in particular, with powers including initiative and control.

On 6 December 2004 the Hera S.p.A. Board of Directors initially approved 17 protocols, one for each single "sensitive area".

The Model was updated most recently on 17 December 2014 and the respective protocols, of which 22 currently exist, have repeatedly been revised.

The "Model 231" adopted, which covers the entire Hera Group, foresees that persons involved in sensitive processes be informed and trained in order to provide them with knowledge of forbidden and obligatory behaviour, creating an awareness of "ethical" behaviour and promoting a group mentality in the way corporate risks are managed.

The risk analysis document with its related audit plan is drawn up for the whole Group every three years, the last of which refers to the period 2019-2021.

The specific risks dealt with by 231 issues are defined by the SB in an Audit Plan that takes into consideration risk analysis, the possibility of extending Model 231 to additional Group companies, any changes that may occur in activities and processes in which "231 area" companies are involved, and updates to regulations.

One essential part of the model is the half-year examination carried out by the Supervisory Body of the flow of information concerning activities that are at risk.†

The Supervisory Body met times in 2019; five sessions were attended by all the members, while one session was attended by almost all the members. The average length of the meetings of the Supervisory Body was approximately one hour.

The Supervisory Body approved and updated the 231 protocols that make up the organizational model, examined the system of information flows that allow it to supervise the functioning and observance of the models and examined reports made following audits, as well as consulting legislative developments pursuant to Legislative Decree 231/2001 and planning additional activities.

In addition to the aforementioned meetings, the Supervisory Body met two more times to engage with the Board of Statutory Auditors of Hera Spa and the Board of Directors of a Group company.

In order to carry out the checks and controls, the Supervisory Board drew up a schedule of measures for verifying compliance with the protocols adopted.

Corruption prevention model

In 2019, Hera Spa obtained the ISO 37001 certification for the prevention of corruption. The Hera Group has consequently adopted a management system for corruption prevention that is integrated into the organization, management and control model pursuant to Legislative Decree 231/01, the foundations of which are rooted in the principles and values expressed in the code of ethics and in the quality and sustainability policy.

Along these lines, the Group has set up a model for corruption prevention which involves establishing a Compliance Department for the prevention of corruption that coincides with the Supervisory Body, to oversee the management system for preventing corruption.

The main responsibilities/functions of the Corruption Prevention Compliance Department are:

overseeing the design and implementation of the management system for the prevention of corruption;

providing advice and guidance to staff (defined as employees at all levels and subjects entrusted with positions of collaboration, including internships and traineeships) about the management system for preventing corruption and corruption issues;

ensuring that the management system for corruption prevention complies with the requirements of UNI ISO 37001;

duly reporting on the functioning of the management system for corruption prevention to the Board of Directors and top management.

Hera Group top management and management staff are personally committed to respecting the model for corruption prevention, including by carrying out awareness-raising and dissemination activities for the principles of the rules aimed at preventing corrupt acts in their own departments.

The corruption prevention model concerns everyone who works for the Hera Group.In 2019 the Hera Group also approved the procedure for defining the so-called whistleblowing system, aimed at preventing the risk of crimes and combating possible violations and fostering the culture of ethics and legality.

Controversies related to diversity, opportunity or wages working condition

As at 25 March 2020 Gruppo Hera was not involved in controversies related to diversity, opportunity or wages working condition.

Hera is the Italian multi-utility that improves every day, with regard to the environment, the quality of its waste management, water and energy services through strong links in the area in which it operates and the capacity for innovation